Pablo Torre breaks down financial questions surrounding Dodgers owner Mark Walter

Geoff Bennett:

A brewing controversy in Major League Baseball is putting the L.A. Dodgers under scrutiny and resurfacing questions about how billionaire Mark Walter acquired the team. At the center of it, a little known business deal involving Lakers legend Magic Johnson.

Our William Brangham has the story.

William Brangham:

Federal investigators have been looking into whether Mark Walter broke the law in how he raised the money and disclosed the source of those funds when he won the 2012 bidding war for ownership of the L.A. Dodgers.

Back then, Magic Johnson was a crucial public booster of Walter's bid. And several years later, Walter sold an insurance company to Johnson, allegedly as repayment for his support. And that transaction made Johnson a billionaire.

Pulitzer Prize-winning journalist Pablo Torre, who hosts the wonderful podcast "Pablo Torre Finds Out," has just dropped some new revelations about this intricate saga, and he joins us now.

Mark Walter's purchase of the Dodgers is this very complex saga involving undisclosed insurance money, a shady TV deal, and financial back-scratching between him and the one and only Magic Johnson.

In a nutshell, can you explain to us, what is the concern or the investigation into Walter all about?

Pablo Torre, Host, "Pablo Torre Finds Out": It's about whether the undisclosed related party transactions that have now been reported extensively in the financial press and now confirmed by us, whether those help explain how we got to basically create the modern sports valuation market when it comes to how it is that all of these teams are pricier and pricier, more than we have ever seen or imagined.

This is the same guy, of course, who bought the Lakers for $10 billion, just sold the Lakers for 12.5. This happened all in conjunction with the idea that now, because the federal government is probing his undisclosed alleged self-dealing, that he now needs to unwind assets in order to actually recoup what has been reported to be tens of billions of dollars.

And the way he got to baseball in the first place is also part of this story, because the way he got that, of course, got that team was, through our reporting, a system of securitizing of a shady TV deal, as well as by borrowing money. And the people who are backstopping all of that money, if you're looking at the paper trail here, it comes to the people who trusted Mark Walter's insurance companies with their nest egg.

We're talking about the parents and grandparents of America. And so it is a story about us, as well as an arcane story about securities law, as well as, of course, sports intrigue.

William Brangham:

And as it pertains to Magic Johnson, what is alleged here, and is what is being alleged illegal?

Pablo Torre:

What we are reporting is that Magic Johnson was the key aspect of how Mark Walter wound up loaning himself more than $300 million to enable the purchase of the Dodgers for a record price.

And the reason I have been focusing on this is because Magic Johnson became a billionaire because of an insurance company called EquiTrust from his good friend and fellow Dodgers co-owner Mark Walter. But when Mark Walter needed to loan himself that more than $300 million, he also made an announcement that I'm selling this thing to Magic.

And then, when he went and did it, that transaction had not yet closed. And so one can imagine that part of the whole deal here was, I need to be able to say that I'm not doing this Mark Walter to Mark Walter, and I need you, Magic, I need to wear you as a costume, according to my reporting, in order to avoid what would be a violation of securities law, because I'm not disclosing that this is just me and me doing a deal with myself.

And when Magic enabled it and became a billionaire, he also became a key aspect of, frankly, a recurring pattern in how Mark Walter was running his insurance companies, borrowing money from himself to pay himself, and therefore sports got a lot richer in the process.

William Brangham:

Before we let you go, I just want to pivot back to your Pulitzer Prize-winning investigation of how the Los Angeles Clippers basketball team evaded the salary cap with a similar set of very complicated machinations.

As you well know, the NBA dropped the hammer on the Clippers this week. They fined them massively. They barred their executives. They stripped them of draft picks. These are not related stories. These are different leagues and different actors involved here, but they do all seem to point to this same alleged machinations of billionaires in pro sports.

Do you see a connection between these?

Pablo Torre:

I do, because the reason the public has taken notice of the behavior of these billionaires, who work in finance and tech in non-sports areas, that's where they make their money, but come to sports, is because they have come to sports.

We are scrutinizing the wealthiest people in America because they own our favorite things. And that accountability, that mechanism of rules potentially mattering in sports is what enabled an accountability to be imposed upon the richest owner in American sports, Steve Ballmer, to the tune of the largest punishment in the history of American sports, thanks to the sources, frankly, and the documentation that I have relied on in the course of one year of reporting.

And that does not happen if this is not a sports story. It is easy to understand. That part, William, is easy to understand. The financial machinations are not. But the question of did you break the rules and do we need to enforce the rules because we care about sports, that's what links this.

Mark Walter owning the Dodgers and the Lakers is what brings the spotlight to him. That merely life insurance and potential self-dealing around securities violations, that would not. But because those teams are involved, now I think there's a reason for lots of people to ask questions.

William Brangham:

Journalist Pablo Torre, great to hear from you. Thank you so much for being here.

Pablo Torre:

Any time. Thank you.